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CCH® PENSION AND BENEFITS — 2/29/08

ASPPA suggests clarification of DOL proposed plan fee regulations

The American Society of Pension Professionals and Actuaries (ASPPA) and the Council of Independent 401(k) Recordkeepers (CIKR) have submitted critical comments and recommendations concerning proposed regulations issued by the U.S. Department of Labor (DOL) under ERISA §408(b)(2) (see CCH Pension Plan Guide ¶20,537F ). The regulations are designed to provide plan fiduciaries with sufficient information to evaluate the reasonableness of compensation and fees paid directly and indirectly to certain service providers (including affiliates), and assess the potential for conflicts of interest that may affect the performance of a service provider. A service contract or arrangement would not be reasonable, for purposes of the prohibited transaction exemption authorized under ERISA for necessary plan services, unless its terms specifically required compliance by a designated service provider (e.g., banks, consultants, investment providers) with a series of new disclosure requirements.

Among their recommendations, ASPPA and CIKR encouraged the DOL to separate disclosure of compensation for all service providers into three general categories:

  1. investment-related fees and expenses;
  2. transaction-related fees and expenses; and
  3. recordkeeping and administrative fees and expenses.

ASPPA and CIKR also recommended that the DOL require a consolidated form of disclosure for all service providers that would be more readily usable by a fiduciary. Additionally, because mutual fund advisers provide indirect services to plans that invest in mutual funds, ASPPA and CIKR requested clarification that both the direct and indirect compensation of fund managers be disclosed to account for these indirect services.

With regard to disclosing conflicts of interest, ASPPA and CIKR asked that the DOL clarify those relationships it believes should be disclosed as conflicts-of-interest to help covered service providers meet requirements to obtain an exemption. Tommy Thomasson, chairman of CIKR, said: “We believe the department can provide greater clarity about disclosure requirements and obtain consistent information from service providers.”